ICELAND: has the massive national bailout resulted in a fisheries subsidy?

According to Iceland's government website massive loans (compared to the size of this nation's economy) have been received from various sources. Here are the main funds received:

On November 19th the IMF approved Iceland’s request for a two year stand-by arrangement. Iceland will receive USD 2.1 billion from the IMF. Additional loans of up to USD 3 billion have been secured from Denmark, Finland, Norway, Sweden, Russia, and Poland. The Faroe Islands have announced that they would lend Iceland USD 50 million.

Another dramatic move by Iceland's authorities was to take control of the troubled banks , in particular of GLITNIR (before ISB), LANDESBANKI and KAUPTHING.

For the aforementioned banks a Norwegian study identified, back in 2005, the assets they held in Icelandic fishing companies.

I copy here the extracts of the studies detailing the stakes in fishing companies.

Landsbanki shareholding in Icelandic companies and financing in the fisheries sector

Landsbanki is still the major owner of the Icelandic Group seafood marketing company, which has a market value of about ISK 23 billion. The largest listed owners in the Icelandic Group (June 2005) are:

1. Burdaras hf. 20.8%
2. Landsbanki Islands 18.1%
3. Straumur Investment Bank 12.4%
4. Sund ehf. (Blue Ice Group) 12.3%
5. Landsbanki Luxemborg S.A. 9.3%

Burdaras is 50% owned by Landsbanki and Straumur Investment Bank is also partly owned by Landsbanki, as shown earlier.
It is generally perceived that Landsbanki does not plan large-scale involvement in the Icelandic Group as a long-term investment.
Landsbanki is indirectly the largest owner of Marel (Processing machinery), through Burdaras which owns 36.3% in Marel, but the bank also has a direct share of 4.1% in Marel.
Landsbanki is actively involved in financing a number of Icelandic fisheries companies, such as:

1. Brim hf - Fishing and processing. Large scale loan to new owners when Landsbanki sold this company.
2. Saeplast - Plastic tubs manufacturing. ISK 750 million financing in conversion of public to private company.
3. Visir - fishing and processing. ISK 4 billion loan for refinancing.
4. Lysi - cod liver oil processing. ISK 1,100 million financing of a new plant.

ISB Fisheries interests

The Bank’s international Seafood Industry Team is part of the Investment Banking Division and consists of corporate financiers, industry analysts, credit officers and dealers with many years’ experience. Fifteen specialists are currently listed on the team with a focus for different geographical areas, such as the US West Coast, South America, Scandinavia, and the United Kingdom.

The London Branch forms a part of the ISB Investment Banking Division. The principal business is corporate finance, which provides advice to clients when undertaking mergers and acquisitions.

The primary focus of business is the food sector - advising companies on transactions in the fisheries, food ingredients and packaged foods sectors.

1. Sig. Agustsson - ISB provided consultancy service on the acquisition of Hevico and arranged the financing when Sig. Agustsson in Iceland bought the Danish company recently. Hevico specialises in the manufacture of smoked trout and is the largest company in its field in Europe.
2. Eskja - ISB arranged for ISK 1,500 million leveraged buy-out and public to private conversion for Eskja (whitefish and pelagic fishing and processing).
3. Samherji - The bank arranged refinancing of Samherji (undisclosed amount)
4. Þorbjörn Fiskanes - The bank arranged leveraged buy-out for the company management (undisclosed amount).
5. Marel - The bank arranged refinancing of Marel (undisclosed amount).
6. Fram Foods - The bank provided ISK 500 million working capital for Fram Foods (Roe products and herring marinades).
7. HB Grandi - the bank provides long-term financing of HB Grandi.

Kaupthing Bank and the fisheries

Kaupthing is not involved in foreign fisheries companies but has large interests in Icelandic fish industry companies. It is a major shareholder in a few fish industry companies, most notably in the SIF Group and HB Grandi.
The five largest shareholders of the SIF Group (June 2005) are the following:

1. Vending Holding (formerly Ker) 28.70%
2. Kaupthing Bank 24.81%
3. Samvinn Pension Fund 5.81%
4. Arion nomine account 4.76%
5. Pension funds (Public employees) 3.95%

Olafur Olafsson, Chairman of the Board of SIF Group is a major owner of Vending Holding. Kaupthing thus owns a quarter of the shares in SIF directly but it was also the provider of EUR 280 million to SIF on the acquisition of the Labeyrie Group in France in late 2004. (It may be noted that the Chairman of SIF is also a significant owner of Kaupthing Bank through Egla Holding).

Kaupthing Bank is also a 30% shareholder in the fish-roe producer Fram Foods, which split off from Bakkavor Group in 2003 (see also under Landsbanki).
The bank is a significant shareholder in HB Grandi (14.4%) and recently financed the purchase and technical modification of the company’s pelagic-processing vessel, which is the largest in the fleet.

Kaupthing Bank was a major provider of finance for Samherji on acquisition of the seafood processing company Pickenpack Hussmann & Hahn in Germany.

Just lately, Kaupthing Bank has refinanced Iceland Seafood International, which was split from the SIF Group and is now only in minority shareholding (45%) of SIF.

The text of the Norwegian report can be found at the following link:

http://www.fiskerifond.no/files/projects/attach/icelandic_bank_report.pdf